(Bloomberg) -- China's official factory gauge matched a post-2012 high as a credit-fueled recovery of smokestack industries gained momentum and signaled a pickup in inflation expectations.
Key Points
- Manufacturing purchasing managers index rose to 51.7 in November, compared with a median estimate of 51 in a Bloomberg survey of economists and 51.2 the prior month
- Non-manufacturing PMI climbed to 54.7 from 54 in October; numbers above 50 indicate improving conditions
- Steel industry PMI increased to 51.0 from 50.7
Big Picture
The report added to evidence that the old growth drivers are picking up, fueled by inexpensive credit, and showed that large companies, which tend to be state owned, are faring better than smaller enterprises. Input prices jumped to the strongest reading since March 2011, signaling that inflationary pressures may be building after China recently snapped four years of factory gate deflation.
Economist Takeaways
"Big companies are seeing strong momentum," said Zhao Yang, chief China economist at Nomura Holdings Inc. in Hong Kong, citing rising material prices and benefits from the yuan decline. "Still, we're going to see some uncertainty in the first half of next year as weakness in property sales will gradually hurt investment and eventually manufacturers."
"The Chinese economy was continuing to improve in November, probably helped along by infrastructure spending, which should underpin December quarter GDP growth of around 6.7 percent or maybe even a bit more," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney. "The main uncertainty though going forward relates to recent signs of a liquidity tightening – evident in rising interbank rates and bond yields – and how long this persists and hence the flow on to growth in December and early next year."
"The bigger driver of the improvement was stabilizing domestic demand," said Julia Wang, an economist at HSBC Holdings Plc in Hong Kong. "There are some risks to growth on the horizon, including weakening of the housing market, and an uncertain external environment from U.S. trade policy. But barring an outright trade war, we expect the headwinds to growth to be manageable."
"With this growth momentum, the PBOC doesn't need to ease," said Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. "The government will make an effort to deal with the structural issues such as capacity reduction and corporate deleveraging."
The Details
- New orders strengthened to 53.2 from 52.8 the prior month
- New export orders rose to 50.3 from 49.2.
- Input prices jumped to 68.3 from 62.6.
- Business activity expectations fell to 55.5, the weakest reading since July, from 58.5
- Small enterprises had the weakest level by size at 47.4, trailing medium-sized companies at 50.1 and large firms, which often are state-owned, at 53.4
- Private manufacturing PMI by Caixin Media and Markit Economics pulled back from a two-year high, edging down to 50.9 from 51.2
- Non-manufacturing PMI climbed on active wholesale, retail and logistics services driven by a online shopping holiday last month, according to an NBS statement
- The sub-gauge of construction activities edged down, as measures to cool property sales weighed on the outlook
--With assistance from Kevin Hamlin and Yinan Zhao To contact Bloomberg News staff for this story: Xiaoqing Pi in Beijing at xpi1@bloomberg.net. To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jeff Kearns, James Mayger
With assistance from Xiaoqing Pi
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
